Organising for innovation: alliance-to-acquisition transitions and patent production

Innovating in the pharmaceutical industry requires firms to use strategic alliances and acquisitions to build complex interorganizational relationships. While the impact of these strategies is well-documented, less is known about the implications of ‘transitioning’ from alliances to acquisitions—that is, acquiring one’s alliance partners. Drawing on resource dependence theory and analysing data from 351 pharmaceutical firms—which collectively announced 1784 acquisitions and filed 65,523 patent applications over a 25-year period—we quantify the effects of transitions on the number of breakthrough and incremental patents produced. Our findings indicate that alliance-to-acquisition transitions enhance incremental innovation but do not significantly impact breakthrough innovation. However, we find that the ‘type’ of transition plays a critical role: acquiring a greater share of international alliance partners—introducing cultural complexity—reduces the number of incremental innovations produced compared to transitions with domestic partners. Similarly, acquiring a greater share of related partners—reducing the firm’s technological complexity—limits the number of breakthrough innovations produced compared to acquiring unrelated partners. These findings provide new insights into how governance choices shape innovation outcomes in the pharmaceutical sector and offer practical guidance for managers seeking to optimize their innovation strategies through informed alliance and acquisition decisions.